Donald Trump’s administration is still reeling from one of their biggest legal defeats. Last week, a federal appeals court found that most of his tariffs are illegal. That decision led to a 7-4 vote. It puts at risk roughly 16% of U.S. goods imports and distorts the economic playing field at a time of heightened and sustained trade turmoil. This ruling specifically targets the so-called “reciprocal tariffs” that Trump ordered in April 2020. It lifts other non-tariff barriers, such as harbors of entry on countries like Mexico, Canada, and China.
Under his presidency, Trump made his broad tariffs justified through the 1977 International Emergency Economic Powers Act (IEEPA). He announced a national emergency because of the United States’ $500 billion trade deficit with other countries. He leveraged this announcement to pay for imposing steep levies. A new baseline tariff of 10% will be the default for most countries that do not have equal or higher reciprocal tariffs. This jurisdictional shift will cover nearly 69% of all U.S. goods imports. The appeals court ruling does not affect the tariffs the Trump Administration imposed on China during Trump’s first term. These tariffs are likely to continue to be in effect for the foreseeable future.
As we noted, the ruling has serious implications for U.S. trade policy. The court’s conclusion threw out the “de minimis” exemption. That means now that imports worth $800 or less will be subject to tariffs and duties. This drastic change will only result in greater costs for consumers and businesses.
On sector-specific tariffs Trump’s administration has pursued an especially aggressive effort to increase tariffs on specific sectors, like steel and aluminum. His policies resulted in a 50% increase in tariffs on these crucial materials. Today those rules apply to more than 400 other product categories. Tariffs apply to over 60 other countries, with shocking rates of 50% on goods from India and Brazil.
Good news for Trump Judging by the recent ruling in civil lawsuit No. His defense contends the tariffs are essential to protect U.S. security interests. In his judgment, he brazenly writes, “If permitted to remain in force this Decision would virtually obliterate the United States of America.
In 2016 the U.S. Court of Appeals for the Federal Circuit reiterated that only Congress has the power to levy taxes, including tariffs. This ruling reminds us to consider the role of legislative intent in tax cases.
“The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution.” – U.S. Court of Appeals for the Federal Circuit
The appeals court’s ruling was a big blow to Trump’s “reciprocal tariffs.” It further puts his larger use of Section 232 tariffs to sidestep legal challenges in the spotlight. Trade enforcement ongoing fights over unfair trade practices raise fears that such practices will hamper domestic industries. This ruling may prompt legislators to reconsider where power should lie between the executive and legislative branches with respect to trade authority.